Methodical and accurate pestle analysis of Tesco
Question
Task: What is the purpose of conducting a pestle analysis of Tesco and how does it help in understanding the changing external environment of the retail industry?
Answer
The motive behind writing this article is just to scan the external environment of Tesco, a retail giant.The company is a famous retail and grocery supermarket. The unpredictable environment of Tesco will be discussed in this article. The pestle analysis of Tesco will analyze the factors affecting the performance and operations of the company.
Tesco is a UK-based multinational retailer with a base in Hertfordshire, England.Considering its profits making capability, it is the 3rd largest in the world. Its revenue-making capability has placed it at the 9th position in the supermarket industry worldwide.Operating since 10919, the company has 4752 stores and operates from 5 different countries, including the UK, Slovakia, Czech Republic, Hungary and Ireland. The services of Tesco have increased manifolds, and it is dealing with insurance services, mobile networks, and broadband along with its retail services. In this article, the pestle analysis of Tesco will be discussed at length to ascertain its position in the market.
Political factor: The Companyoperates from 5 different countries, and its operations areprone to several political factors that can influence it.Factors such as legislation, unemployment rate, tax rate, economic condition and political instability of the countries can affect the operations of Tesco.For instance, Tesco imports some of its inventory from countries like China and East Asia, and the import duty on these goods can affect its pricing. The chairman of Tesco, Johan Allan, had openly discussed the political factors affecting the company.In his discussion, he explained how the European Union referendum is creating a risk for its investors and how the British economy is dealing with its economic adversities.As per the pestle analysis of Tesco findings, the local council in the UK had proposed a ‘Tesco tax’ on the supermarket which was too high to adjust for the company, but the proposal was rejected by the UK government in view of avoiding a price hike. If such proposals get approval in the coming years, then it will have a negative effect on the operations of the company.
Economic factor: The cost of labor is one of the economic factors that can affect Tesco and its operations in different countries. For instance, the yearly wages of its labors cost around £4.5 billion. The UK government increased its minimum wage rate by 4.4 per cent in 2018. The rule applies to labors aged 25 and above and has highly impacted the company's budget. Today, Tesco has to pay millions of pounds in distributing wages for its workforce.The findings from the pestle analysis of Tesco state that apart from the labor costs, there are other economic factors affecting the company, like prices, costs and profits. It is advised to the company to concentrate on thehiked borrowing cost in the UK as it can inflate its costs and prices, leading to reduced profits.The result can affect its brand recognition and alter leadership strategies, including the cost leadership strategy.The company has run successfully internationally for all these years due to its diversification strategy. But the company has to rethink its strategies in the UK as it has only 27.7 per cent of the market share in the country.
Social factor: The shopping tendency of consumers is constantly evolving with time.The strict schedule of the consumers makes them demand items from companies which can deliver in one day and has an easy return policy.In addition, consumers these days prefer all-inclusive stores. Tesco must understand these consumer buying behaviour changes and revise its services to meet its changing needs.As per the Pestle analysis of Tesco, it should at least try to revise its services delivered in the UK stores.Another issue which has time and again affected the company's operations is the change in demand for products basis consumer beliefs and attitudes. After the coronavirus, customers have become more health conscious and have understood that eating fatty products can only make them obese.It is advised in this pestle analysis of Tesco that it has to incorporate health and organic food products in its menu, which can attract the attention of consumers concerned about their health.As per the report of PricewaterhouseCoopers (PWC), about 65 per cent of shoppers in the UK are loyal customers of Tesco; hence, the company should utilize this opportunity to build proximate ties with these customers. The company's representatives should have a one-to-one conversation with these customers to understand their preferences and make a solid connection.
Technological factor: Back in 2013, the company faced the Horsegate scandal, which was recognized as the greatest threat to food safety.Customers purchasing from Tesco were not too satisfied, and some even had bad experiences.Applying new technologies helped Tesco gain the lost trust of the customers. It opened new opportunities for the company.The company adopted many retail technologies, like barcode scanners, inventory management systems, customer relationship management systems, etc., and focused on retrieval technologies.As per the pestle analysis of Tesco's findings, the company embraced the RFID technology to enhance its customers' experiences while shopping from the store.The technology automatically computes all the stock and clears away the sold stocks.The technology and its information areuseful for the suppliers and can be used whenever required. Tesco built its online payment application, PayQwiq, to make payment easier for its customers. The application is being used by 524 stores of the company located between London to Edinburgh.The application can be easily linked with the Tesco Clubcard. Customers can use this application to make payments and earn loyalty points.Tesco has introduced a 'scan as you shop' service for its customers, making shopping more convenient.With this application mentioned in the pestle analysis of Tesco, customers can scan their selected products with the aid of a handheld scanner when they pass through the store. The customers can even put the products into their bags, and once they are done, they can go to a scan as you shop till to pay.
Environmental factor: Addressing environmental issues is a pressing topic for companies to address, and each country's governments ensure that the same is addressed effectively. Responding to these issues is also beneficial for society, and customers prefer companies that address environmental issues.It is found from the pestle analysis of Tesco that Tesco encourages its customers to shop at tesco.com, which will help save time and fuel.The van drivers of Tesco use shorter routes which could save fuel. Tesco collects non-usable plastic bags from customers for recycling purposes.In a few years, Tesco has altered 800 of its products to help bring down plastic waste.The company's marine products are sustainably sourced, and the same is certified. It is found from the pestle analysis of Tesco that Tesco is trying hard to fulfil its part towards creating sustainable development. The company has committed itself to use only renewable sources for its electricity consumption by 2030.Tesco has also committed to reducing its carbon footprint by up to 50 per cent by 2020.
Legal factor:If you are running a business, you must consider laws applicable in all areas. You need to be updated about the changing laws which can directly or indirectly affect the business. Tesco must analyze all the laws applicable to its operations to achieve its objectives.It was reported in 2016 that some of the stores of Tesco were discriminating among their workers based on age and gender. As per the pestle analysis of Tesco's findings, 17 of its workers took cognizance of this event and reported this matter for further legal action against the employer.The workers got infuriated when they found out they were being paid less for night shifts and for working on bank holidays compared to others working the same shift.The company was also accused of accounting fraud to mislead the investors, for which it was asked to pay £12 million as compensation.It is advised in this pestle analysis of Tesco article that the company must operate according to the standards of the Food Retailing Commission and follow the ethical code of practice. Tesco has been using various factors to remain competitive in the business and to achieve greater success. It has employed strategies to make use of political upheavals, economic and social trends, technological advancements, and environmental concerns.
The article on the pestle analysis of Tesco has reviewed each aspect of the external environment which has affected or could affect the operations of the company. The pestle analysis of Tesco will aid you in understanding which factors can affect the retail industry and how the retailers can boost the growth and expansion of their companies.
Frequently asked questions
1. What are the advantages of pestle analysis?
• It helps to recognize potential threats and opportunities in advance
• It recommends companies check the external environment of their operational areas
• It helps in understanding and making use of the external trends
2. What are the disadvantages of pestle analysis?
• The model is not comprehensive and is insufficient for big companies
• It is only based on an external assessment, which is its biggest drawback
3. How to conduct a pestle analysis?
There are many steps involved before you begin to undertake a pestle analysis. First, you must form a group of people from different areas of the business. Second, you will have to seek an expert opinion outside the business. Third, you need to research and collect evidence which can support your analysis. Then you need to address the analysis of its likelihood of happening and imagine its impact. You need to follow these steps for each of the six categories.,/
4. What is LoNGPESTLE?
LoNGPESTLE is an extension of the pestle. Local, national and global dimensions were added to each pillar of pestle. Therefore, the entries for the analysis can be classified by their geographic impact.
5. Who invented pestle?
The concept of pestle was introduced by Francis Aguilarin 1967 in one of his books. Initially, it was referred to as ETPS or PEST.
6. Can I use this pestle analysis of Tesco for my assignment?
Yes, you can use the content of this pestle analysis of Tesco for your assignment but be sure to rephrase the statements to avoid any kind of plagiarism.
